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Key Terms


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when anyone can decide to enter a market
a market structure in which only a few sellers offer similar or identical products
Imperfect Competition
when firms have competitors but, at the same time, do not face so much competition that they are price takers
a group of firms acting in unison
Price Taker
a buyer or seller that must accept the price the market determines
an oligopoly with only two members
Dominant Strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
Average Revenue
total revenue divided by the quantity sold
Marginal Revenue
the change in total revenue from an additional unit sold
Sunk Cost
a cost that has already been committed and cannot be recovered
an agreement among firms in a market about quantities to produce or prices to charge
Competitive Market
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
a firm that is the sole seller of a product without close substitutes
Nash Equilibrium
a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
Natural Monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Game Theory
the study of how people behave in strategic situations
Prisoner's Dilemma
a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
Efficient Scale
the quantity of output that minimizes average total cost
Monopolistic Competition
a market structure in which many firms sell products that are similar but not identical
Price Maker
a monopoly where the seller sets the price
Shut Down
when a firm decides to not produce anything at all

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